Homework Problems (40 points)
- A consumer is considering leasing a vehicle with monthly payments of $62. a) Calculate the annual cost of the lease. b) Calculate the total cost over 12 years if the consumer continues to lease similar vehicles.
- Calculate the operating costs for a motor vehicle with the following annual expenses:
- Depreciation: $2,500
- Interest: $650
- Insurance: $680
- Registration: $65
- Gasoline: $1,925
- Repairs: $370
- Parking: $420
- Annual mileage: 13,200 miles
- a) What is the total annual operating cost of the vehicle? b) What is the operating cost per mile?
- Compare the total cost of purchasing versus leasing a vehicle with the following information:
- Purchase option: $1,500 down payment, $450 monthly payment for 48 months, estimated scrap value of $4,000 after 4 years
- Lease option: $500 down payment, $450 monthly payment for 36 months, $600 end-of-lease charges
- Opportunity cost of money: 4% annually
- Which option is more economical based on total cost?
- In a class action lawsuit against a car manufacturer, the court awarded $1,400,000 to consumers. After legal fees of $300,000, the award will be distributed to 62,000 affected owners. How much will each consumer receive?
Case Analysis: Online Car Buying (30 points)
Case Scenario: A friend is considering purchasing a vehicle through an online car buying service rather than visiting traditional dealerships. They have heard that online car buying can save time and potentially money, but they’re concerned about the process and potential risks.Questions:R1. What are the potential advantages and disadvantages of purchasing a vehicle online compared to traditional dealership shopping?R2. What research strategies would you recommend to someone considering an online car purchase?R3. Based on your own online shopping experiences, what precautions should be taken when making major purchases online?R4. What is a “lemon” in the context of vehicle purchases, and what legal protections exist for consumers who purchase defective vehicles?
